Why Are Home Prices Increasing in the U.S.?
3 minute read
June 14, 2018


Home prices in the United States have been rising for several years. What is going on?

As we explained in our recent article “Rising Interest Rates are Affecting Home Affordability”, interest rates have been rising since mid to late 2017 and are projected to continue this trend. However, interest rates aren’t the only reason that home prices are increasing.


Home Inventory is Low

With an influx of buyers in the housing market, but cities that are cramped for space to build and concerns about density in these cities, home prices are being driven up, up, up. The increase in home purchasers was influenced heavily by the all-time low-interest rates that we have been enjoying for the past several years. Demand led to a shortage of homes for purchase, specifically homes at the right price point for most buyers.

Natural Disasters have Redirected Building Resources

Simply put, 2017 was a destructive year. The past year was considered an “extremely active year” for hurricanes by the National Hurricane Center. Hurricanes, Harvey, Irma, and Maria left a trail of destruction and wrecked infrastructure that had to be addressed. The wildfires that tore through California had a major effect on the construction industry as well. Resources to build new homes were, and in some cases still are, focused on recovery efforts for the regions devastated by these natural disasters.

The Rental Market is Cutting into the Housing Market

Renting is becoming an increasingly popular option once again in major cities. The number of houses for sale at a reasonable rate is almost non-existent in major cities, particularly in destinations like Austin, Texas. These markets appeal strongly to buyers with money in their pockets and young renters. The age of home buyers in these areas is rising as renters wait longer to purchase a home and a younger population hesitates to invest. Contrary to the housing issues in cities, suburbs in these areas continue to enjoy larger numbers of home buyers. The ability to continue to build and expand neighborhoods in suburbs rather than major cities is a strong contributor to this trend.

The most important takeaway from all of this is that home prices and interest rates are likely to continue to increase. Over the next couple of years, the answer to the best time to buy will probably always be “now”. With this in mind, don’t wait to see if the market will shift in your favor. If you have been discussing purchasing a new home, the time is now while rates are still low, but on an upward trend. Park Place Finance is here to help you find the best interest rate for your mortgage loan and can help you navigate the market with our connections to REALTORS®, appraisers, inspectors, and insurance agents to make the process easy for you.


We not only make working with Park Place Finance easy but fun too! The World Cup is starting, and we have an exciting contest exclusively for our email subscribers.

Email us at info@parkplaceus.com with ‘Join Mailing List’ in the subject line* for the opportunity to enter our contests throughout the year! This month we are giving away a $200 Visa gift card. Details are available in our email. If you want the chance to meet your home financing GOOOOOOOOOOOALS, contact Park Place Finance today and we’ll put our experience to work for you.

*By doing so you are consenting to join the Park Place Finance email list and will receive monthly newsletters from Park Place Finance. You can opt-out at any time.

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